G.R. No. L-12181; September 30, 1959
LUCIO R. ILDEFONSO, plaintiff-appellant, vs. ERNESTO Y. SIBAL, defendant-appellee.

FACTS

On October 15, 1953, the parties executed a Compromise Agreement to settle Civil Case No. 15371, leading to the dismissal of the case. The agreement stipulated that defendant Ernesto Y. Sibal would pay plaintiff Lucio R. Ildefonso P1,000.00 and that, within two years, Sibal would “course through the plaintiff as Realtor the former’s real estate purchase or transaction.” A penal clause stated that should Sibal “fail thereof, that is, to make such real estate purchase and to course the same to the plaintiff as said Realtor,” he would be liable to pay an additional P2,000.00. During the two-year period, Sibal commissioned Ildefonso to sell some of his properties, but they were not sold. Ildefonso also offered to sell several properties to Sibal (the Great Eastern Hotel, Borja Building, and a Rizal Avenue lot), but Sibal declined, finding them either beyond his means, inappropriate for his business, or too small. After the period lapsed without a purchase, Ildefonso sued to recover the P2,000.00 penalty, alleging Sibal failed to make a real estate purchase as promised. Sibal defended that his obligation was only to course any purchase or sale through Ildefonso, not an absolute obligation to buy, and that his failure to transact was due to Ildefonso’s inability to find suitable properties.

ISSUE

Whether or not defendant Sibal violated his obligation under paragraph 2(b) of the Compromise Agreement, thereby becoming liable to pay the P2,000.00 penalty.

RULING

No. The Supreme Court affirmed the trial court’s decision dismissing the complaint. The Court held that the principal undertaking of Sibal under the agreement was to “course” or make his real estate purchases and sales through Ildefonso as his exclusive agent for two years. It was not an absolute obligation to purchase real estate. The record showed that during negotiations, Sibal merely suggested he “could course the transaction through appellant,” and the penalty was for breach of that agency. The Court found it unreasonable to construe the agreement as compelling Sibal to purchase property, especially if unsuitable or unaffordable, to avoid penalty. Since it was undisputed that Sibal did course his transactions through Ildefonso during the period and that no purchase occurred through no fault attributable to Sibal, there was no breach. Furthermore, any ambiguity in the clause was construed against Ildefonso, who caused it, as the agreement was drawn by his counsel, pursuant to Article 1377 of the Civil Code.